Archive for 2007

Wild Weekly Wrap-Up – Down Goes Cramer!

  • biodieselchris – Posted August 3, 2007 at 3:47 pm | Permalink

    "every position I had was green today. Even LEND calls.  I have never seen that since I started investing in 2000.  And in no small way some thanks is in order to PSW…  "

    Thanks BDC!  What a great way to end a great week in the markets!

    We finally got the beginnings of the correction we've been planning for and all those investment in the "wrong" direction have finally paid off.  We stand now at the tip of a major inflection point in the markets and, as I'm taking a vacation, I've left the 25% of non-cash positions very well hedged (I hope) with a remaining downside bias.

    Paranoia really paid off this week as we very simply nailed the market movements on the head.  If I weren't going away (and already in trouble for not packing yet!) I could write the most amazing essay about how we (Happy, Zman, Sage and I) arrived at these conclusions but I will just say it was a great team effort and I couldn't be prouder of both our writers and our great contributing members who make up the smartest community of market watchers I've ever been a part of!

    As many of you know, Happy Trading and ZMan are "going pro" this month and this is going to be a great thing.  The ability to devote more of our time to the markets and more time to this newsletter has truly turned this from a hobby (and if you doubt that feel free to go back to my 2005 blogspot files!) into a real profession and I can already see the level of analysis ratcheting up as we each get comfortable knowing that, day-in, day-out THIS is what we do for a living!

    Anyway, so the PSW team was in full swing this past week.  Actually, why be modest?  This whole month has been incredible but the quick highlights of the week were:


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Vacation Notes

Notes on positions for members:

I’m sorry i didn’t get to finish the LTP review.  The market got crazy and that thing with the mortgages came up Wednesday which caused me to pull an all-nighter trying to figure out what was going on which led me to conclude that the markets were about to collapse.  This is what I do to protect my own virtual portfolio – study, study, study and sometimes I have to prioritize.  As fast as I read it still does take a lot of effort so I’m sorry AND not sorry at the same time as I think arriving at the correct market call trumps specific roll recommendations.

Please take a good look at the LTP and feel free to question the logic of any rolls or covers you see.  I pretty much covered everything that made sense to cover, mostly with Septembers (on new covers) as I’ll be away and it’s less hassle but, ordinarily, I hate to give my callers more than 30 days to cash in.  The structure of my current virtual portfolio is not aimed at making money in either direction, my goal is to be about neutral when I get back on the 20th but I will take action as appropriate

Most of my callers/putters have 50% hard stops on them, which I hate but not as much as I hate giving someone a double!  My other positions seem well balanced enough – I figure if they survived this week, what the heck else can the market do to them? 

It’s one thing to call for 12,500 as a "necessary correction" and quite another to see it happen.  I take no pleasure in being right about a crash but it sure beats being wrong!  My original correction call was for 11,500 but that was way back in November and we did correct to 12,000 so I feel satisfied with that but this run became unhealthy when the PPT wouldn’t let the market correct below 13,500 in June and the run to 14,000 was pretty much a joke given the economic environment.  The more you put off a correction, the worse it can get and if 13,000 doesn’t hold I think 12,500 is a certainty.  Understand (for all you 1-min chart watchers) that not holding 13,000 means breaking below 12,900 for more than a day, not skimming to 12,995 in intra-day trading!
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Friday Virtual Portfolio Moves

Posted August 3, 2007 at 10:31 am | Permalink (Edit)

Downside – I’m still following mattress play rules of course although I wish I hadn’t cut off my August puts yesterday as they would have been great this morning but I’m around 80% cash and carrying the September AND August puts was overkill and dangerous going into my vacation.

FAF is driving LFG and FNF further south!

EOG Sept $75s at $2.50 are cheaper than yesterday, not a bad play to make. XXX

CYCL – this is another good one to own and sell calls (7% return on sept here) as they are a solid long-range outlook but who the hell knows what mid term. Mar ‘08 is the furthest out you can go and $1.50 for the $10s (15%) is a bit much but, on the other hand, you can buy the stock for $9.81, sell the March calls for a net 8.31 basis and, if you get called away at $10 that’s 20% for 7 months – you could do a lot worse in this market. When you enter thinly traded issues like this it is best to just buy maybe 500 shares at a time and see how long it takes to sell leaps before committing to that strategy. XXX

Posted August 3, 2007 at 10:37 am | Permalink (Edit)

Hurricane outlook reduced! Oil falling fast, very good time to think about our hurricane plays.

Posted August 3, 2007 at 12:05 pm | Permalink (Edit)

Options trading in July was up 72%, a new record, I think we may have contributed a point or two on the mattress plays alone! OXPS Mar $27.50s are $2.17 and you can sell the Aug $27.50s for .30 (but I’d wait for a bounce) XXX

PCLN – I decided to risk my Oct $75s into earnings but my basis is just $1.45 on 10 so not exactly betting the farm. SINA/BAY – that’s an interesting trading pair! Big Pharma is getting hammered and BAY looks attractive here but so did PFE last month! SINA falls under my don’t bet on China ADR rules, which I often break and would consider doing for this one as I think they are in just the…
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TGIF!

Woo hoo – vacation time!

Usually when I take off I am filled with regrets as I hate to miss the fun in the markets but I've never been happier to lighten up on positions and take a break.

I've been talking about fundamentals all week, possibly looking a little like Chicken Little as I'm telling people the sky is falling while the market rallies but I'm not here to win a popularity contest so I'm really pushing the "better safe than sorry" school of investing this month as my best case scenario for the next couple of weeks is that we consolidate around 13,600 and my worst-case scenario is downright depressing!

Not as depressing as working for AHM of course, that company announced they would cease "most" operations and will be letting go of 6,250 of their 7,000 employees.  If you ever need to be reminded how clueless the market can be, take a look at yesterday's chart on American Home Mortgage as it went from $1.50 to $4.50 and back to $1.50 in yesterday's trading.  This is real money people, not play money – what the hell are you thinking?!?

[Endangered Loans]According to today's WSJ, lenders are clamping down on all risky mortgages, that includes "Alt-A" mortgages like no-doc loans that speculators often use (when you have lots of money and no time).  Since $1T worth of Alt-A and Sub-prime loans were written last year and the year before, we can assume at least (and boy, am I being kind) half of those deals will die this year, knocking out $500Bn of home transactions.  At a national average of $250K per home and assuming the 1/2 of those loans are refinances (also generous), that's 1M homes that won't move, close to 1/4 of a year's total transactions

  • That's 1/4 less commissions for realtors
  • That's 1/4 less business for the mortgage industry
  • That's 1/4 less business for movers, decorators, painters….

Overall July employment was up 92,000 in this morning's report, quite a bit less than the 135,000 expected and LESS THAN HALF of last July's 220,000 jobs.  The "growth" came in health care, hospitality and, surprisingly, financial services but AHM will certainly fix that!  This is pretty bearish for a "Goldilocks" number…
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Thursday Wrap-Up – Are the Brokers Broken?

Yipee, another strong finish in the markets.

Now we made some technical levels and I'm happy and Happy Trading is happy:

 

Just because we are happy does not mean we are jumping right back into the markets but we have been nibbling at a few leaps as this has been a very good time to establish a few longer plays in case we really are on the road to recovery.  I've been cashing out with no regrets as this is my second to last day before vacation and the market just doesn't seem like the best place to keep my assets while I'm away!

Will we have follow through to this very positive movement tomorrow?  Well, if we don't, I'll be much doom and gloomier about the future as we have every technical reason to march the S&P to at least a retest of 1,510 and consolidating over that line would be a very good thing (Dow about 13,600).  The chart for the Nasdaq also looks promising:

 

While this all does make for a pretty chart, I have often said charts can be forced and 2 consecutive days where 100% of our gains came after 3pm in one giant spike may move a chart but do not move me to move my money back into the markets. 

There are still some very ugly fundamentals to deal with.  As I noted in the morning post, the credit market issues are spreading RAPIDLY and it is beyond naive to think that this is just a bump in the road and it's the denial that makes me nervous. Just  a week ago today I said (in large typeface) "When the M&As start to unwind it is time to be all cash or short the market – this is that time!!!"  Today the WSJ counts 46 M&A deals worth more than $60Bn have been pulled since June 22nd (see I needed a large typeface again!).

So not only has nothing fundamentally changed since I started becoming concerned about the markets but things are deteriorating rapidly.  How many deals were pulled last year?  None!  A lot of work goes into setting up an M&A deal and things have to be pretty catastrophic to take all that work, pay all those…
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Thursday Virtual Portfolio Moves

Posted August 2, 2007 at 9:57 am | Permalink (Edit)
FAF etc – I’d take them off the table and key on FAF for another down leg as they have barely dropped compared to LFG and FNF is a stronger company. If you take it all off the table and pick up some Oct $40 puts for $1.75 but if the market comes back these guys will all recover somewhat so what’s so bad about taking 700% off the table??? I’m sure we’ll find something else to trade tomorrow.
Posted August 2, 2007 at 10:44 am | Permalink (Edit)

TASR – just a buying opportunity here. I’ve got the ‘08 $15s, now back to $2.15 and I cashed in the $17.50s I sold against them at $2.80 for .25 and then sold the $15s against for .80, now .47 so how can I be upset? Back down here I’m going to roll to some ‘09 $12.50s at $5 and work my way back.

WFR – I’ve got the Jan $60s naked and I’m waiting hopefull get a couple of bucks for the $65s but I will sell the $60s for $2 if the market (especially the SOX, which are already sub 500) starts to break down.

Posted August 2, 2007 at 11:23 am | Permalink (Edit)

XOM in a death spiral! Other majors following. I’m tempted to go with XLE $67 puts but this is the point when they usually turn around so I will be patient… 8-(

JBX – new sirloin burger was a big hit and they got a very big, unwarranted sell-off from last earnings. The sirloin is $4.49 vs $1.39 for their regular burgers. I like the Mar $70s at $4.95, selling 3/4 the Sept $65s for $3.40 which puts you in for $2.40 with 5 months to roll. XXX

Posted August 2, 2007 at 11:56 am | Permalink (Edit)

I’m trying to decide if we can put together another 100 points and the SPY is far behind the DIA this morning so I’ll take a shot at the $147s for $2.55 XXX

Posted


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Thursday Morning

The markets seem once again determined to open positive so who am I to argue?

In my wrap-up yesterday we discussed a possibly disastrous situation developing in the bond markets and this morning I see that MS is being fined for overcharging retail investors as much as 18% on bonds they recommended as "safe" investments.  MarketWatch's has an article about 20 tipping points that can wreck this rally and the WSJ has had to start a chart to track  How Credit-Market Tremors Have Affected Junk Bonds, LBOs and Hedge Funds.

Just this week alone they've added the following:

07/30/2007 IKB Deutsche Industriebank AG   Profit problems   CEO left; profit warning issued   Company says it can't maintain its earnings forecast of EUR280 million for the 2007-08 financial year; IKB says it has "felt the impact" of the U.S. subprime crisis; Commerzbank said the difficulties will shave its profits by 80 million euros  
07/30/2007 American Home Mortgage Investment   Margin Calls   Banks demanded more cash after the lender wrote down the value of its loan and security virtual portfolios   Shares of the real-estate investment trust were halted for more than a day; lender delayed paying dividends on common stock, may delay payments on preferred shares because of margin calls; may have to sell assets, find new financing, or restructure debt to meet banks' demands  
07/30/2007 Stoneridge   Offering delayed   $200 million senior secured term loan postponed indefinitely due to "unfavorable market conditions   The electronic component maker was forced to cancel its tender offer to purchase its $200 million in outstanding senior notes  
07/30/2007 Insight Communications   Offering delayed   Bids for the New York cable operator were due yesterday, now delayed more than a week by the firm's bankers   Bankers at Morgan Stanley delayed to give private-equity bidders more time to line


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Wild Wednesday Wrap-Up

"Whether you are a bull or a bear, please be careful out there"  – Me, 9:30 this morning!

Wow – a little something for everyone today!

  • Dow_aug_1_0709:30: 13,211
  • 09:36: 13,280 (+69)
  • 09:49: 13,159 (-121)
  • 10:20: 13,286 (+147)
  • 11:00: 13.135 (-151)
  • 12:35: 13,307 (+172)
  • 01:24: 13,173 (-134)
  • 02:05: 13,246 (+73)
  • 03:26: 13,146 (-100)
  • 03:56: 13,391 (+245)

That's 1,212 worth of Dow movement in just one day!  Needless to say it was very exciting for us and we had a ball getting in and out of oil puts, and calls as well as index puts and calls on a day that was lots of fun but also reminded us why we are mainly in cash!

We had successful tests of both the S&P at our target of 1,440 and the Nasdaq at 2,525 but I thought the end of day movement looked a little forced so I remain in full-blown skeptical mode:

 

Oil came down just a bit today ($1.68), despite a large draw in crude inventories - hopefully it was something we said!   Let's keep forwarding Tuesday's wrap-up to every politician you can get your hands on until we start hearing questions about crooked oil trading being thrown at the candidates! 

I'm not going to say anything else about the markets just now other than the fact that I got a very disturbing call from someone in the mortgage industry and he told me that there is a liquidity crunch in the credit industry and margin calls are being made.  I will warn you that this is, so far (10pm) unsubstantiated and it is unlikely I'll know until morning but what that means is this:

Higher credit risk is driving DOWN the price of bonds (you pay face or "par" value for a bond but the value of the bond fluctuates depending on whether the rate of interest you get is better or worse than the prevailing rates and the…
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Wednesday Virtual Portfolio Moves

Posted August 1, 2007 at 9:43 am | Permalink (Edit)

XOM making a break for it, the Dow needs them above $93 to make real progress. AAPL failing in its comeback (very bad sign as it just got an upgrade). BIG WARNING – despite the “rally” my index puts are UP and my DIA calls are down – that indicates tremendous negative sentiment!!!

Posted August 1, 2007 at 9:49 am | Permalink (Edit)

Shorting – I was looking to short the DIA but then I ran into that very strange option behavior. CME may make a fun mo play with the $550 puts at $9.50 XXX

AAPL – answer – a lot! This is a roll down play as an upside hedge against a bearish virtual portfolio. If we are going to recover Apple should be a leader. I already moved to the $140s and now the $135s are getting interesting at $10.05. It’s costing about $2 per roll to gain $5 in position but I can still get $6 for the Aug $130s if I decide it’s hopeless.

Posted August 1, 2007 at 10:43 am | Permalink (Edit)

Go Google! Go Apple! Go markets!

NAK – I would hope for a pullback as a new entry, they’ve had a great run and it’s still a long time until they get production out of Alaska. That’s not in a current virtual portfolio, just my retirement account along with GE, OLED (not for long), EBAY, T, INTC and TASR. Those are essentially the stocks I expect to be up consistently for the next 25 years. I sell calls against the slow ones but usually 5% out of the money for roughly an 8% annual bonus to the movement of the stocks.

ISM was fine – exports were strong per my restaurant example this morning. And yes, Chris, there is a small shakedown operation going on but once we are under new management I think a lot of that will repair itself, assuming we can stay in business that long!

GRMN/MA/EVERYTHING – Rule #1 – I’m not even going to say it again!

WFR around $60 is a buy from me too! XXX

Inventory play – XOM can give back that $1.20 gain…
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Always an Option 1:3 – August 2007

Download the latest issue here:

Always an Option 1:3

As always, we appreciate any feedback. Fire off an email to admin@philstockworld.com.  Also, this is a great opportunity to remind everyone: please add our email address to your address book, white list, safe list, or whatever else you use so that messages from us don’t end up in your junk folder.





 
 
 

Phil's Favorites

Congress is considering privacy legislation - be afraid

 

Congress is considering privacy legislation – be afraid

Courtesy of Jeff Sovern, St. John's University

Supreme Court Justice Louis Brandeis called privacy the “right to be let alone.” Perhaps Congress should give states trying to protect consumer data the same right.

For years, a gridlocked Congress ignored privacy, apart from occasionally scolding companies such as Equifax and Marriott after their major data breaches. In its absence, ...



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Zero Hedge

Key Events This Week: Trade War, EU Elections, Durables, PMIs And Fed Minutes

Courtesy of ZeroHedge

Looking at this week's key events, Deutsche Bank's Craig Nicol writes that while the unpredictable nature of US-China trade developments will likely continue to be the main focus for markets again next week, we also have the European Parliament elections circus to look forward to as well as various survey reports including the flash May PMIs which may offer some insight into the impact of trade escalation on economic data. The FOMC and ECB meeting minutes are also due, along with a heavy calendar of Fed officials speaking.

The European Parliament elections will kick off next Thursday with voting continuing into the weekend across the continent, with results expected on Sunday. With the elections surrounded by internal and external challenges for the EU, members di...



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Kimble Charting Solutions

Will S&P 500 Double Top Derail The Rally?

Courtesy of Chris Kimble.

The rally off the December stock market lows has been strong, to say the least. The S&P 500 rallied 25 percent before hitting and testing the 2018 high.

The old highs proved to be formidable resistance and ushered in some volatility in May… and a 5 percent pullback.

In today’s 2-pack, we look at that resistance level – could that be a double top? We can see similar patterns develop on the S&P 500 Index and its Equal Weight counterpart.

Both indexes are testing short-term Fibonacci retracement levels of the recent decline at point (2).

What takes place here after potential double top highs will be important. Stay tuned...



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Insider Scoop

60 Biggest Movers From Friday

Courtesy of Benzinga.

Gainers
  • Fastly, Inc. (NYSE: FSLY) shares jumped 50 percent to close at $23.99 on Friday. Fastly priced its 11.25 million share IPO at $16 per share.
  • Outlook Therapeutics, Inc. (NASDAQ: OTLK) shares climbed 37.3 percent to close at $2.10 on Friday after the stock rose over 68 percent Thursday following an Oppenheimer initiation at Outperform with a price target of $12.
  • Cray Inc. (NASDAQ: CRAY) shares rose 22.5 percent to close at $36.52 after Hewlett Packard Enterpri...


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Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

Reminder: We are available to chat with Members, comments are found below each post.

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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